Fiduciary Duties

The flavors of fiduciary status under ERISA

TDFs as targets in ERISA litigation

Why states have opted to “Go Your Own Way” on fiduciary standards re. broker-dealers and investment advisers

Over the past 2 years, the states have taken disparate approaches to filling what they perceive as a regulatory void when the DOL Fiduciary Rule was struck down by a federal court. At the outset, most states, with the exception of Nevada, took a disclosure-based approach (most notably, NY and NJ), and legislation was the preferred avenue. Now, the trend is toward heightening the standard of care (disclosure appears to be viewed skeptically) through regulation (executive/governor’s branch). Though it varies by state, there at times can be incongruity of approach taken within a state. For example, the New Jersey legislation favored disclosure, whereas Governor Murphy preferred a new standard of care. Though the New Jersey legislation is unlikely to be reintroduced next year, it highlights a risk for market participants when there is inconsistency intrastate and interstate. We are expecting to see draft bills over the coming months for the next session in a small handful of states, but will also keep a (very) close eye on if and when either or both of New Jersey and Massachusetts decide to move forward with their fiduciary duty regulations applicable to broker-dealers and investment advisers. Nevada is also likely to be moving forward with finalization on its proposed fiduciary implementing regulation.

Go Your Own Way: States pursue their own fiduciary standards for broker-dealers

A wider net in 401(k) litigation

A recent article in InvestmentNews highlighted recent 401(k) litigation brought against small plans. While this type of litigation was traditionally brought against fiduciaries of large plans, plaintiffs’ firms have begun to target plans as small as $9 million. These suits are typically settled, rather than decided on the merits, but the risk of litigation has instilled fear and sensitivity in plan sponsors. One of the best defenses is a prudent process.

Dual registrants purportedly present greater conflicts of interest

Excessive fee suits continue to be brought against small(er) plans

As described in a recent planadviser article, ERISA fee litigation against plans on the smaller side continue. One suit was brought against a plan with only $9 million in assets. Plan sponsors and committees continue to operate in a high risk ERISA environment.

SEC alleges breach of fiduciary duty over undisclosed conflicts of interest

CFP Board said to take action in response to critical WSJ analysis

Live Blogging: IA Interpretive Release – rollovers/low cost products

Sarah mentions that the fiduciary duty applies to advice re. rollovers and to prospective clients. In terms of satisfying the fiduciary standard of care, merely selecting the lowest cost product is not sufficient. With respect to the duty of loyalty, informed consent can be explicit or implicit and need not be in writing. However, such conflicts may be of such a nature that full and fair disclosure may not be enough.